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Employer Size or Skill-Group Size Effect on Wages?

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Author Info
Erling Barth () (Institute for Social Research, Oslo, University of Oslo and IZA Bonn)
Harald Dale-Olsen () (Institute for Social Research, Oslo)

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Abstract

It turns out that the employer-size effect on individual wages dwindles away once one control for the number of workers of the same skill-group (educational type) as the observed individual within the establishment. The skill-group size effect on wages is substantial. The main results, a dwindling employer size effect and a significant group size effect, remain after controlling for both individual and establishment specific heterogeneity. This observation rejects most of the proposed explanations for the employer-size effect, while it lends considerable support for the notion that there are frictions in the labor market and that each establishment faces an upward sloping supply curve for each type of labor.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1888.

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Length: 32 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1888

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Related research
Keywords: wage differentials; size wage effect;

Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Green, Francis & Machin, Stephen & Manning, Alan, 1996. "The Employer Size-Wage Effect: Can Dynamic Monopsony Provide an Explanation?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 433-55, July. [Downloadable!] (restricted)
  2. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, vol. 5(4), pages 425-448, December. [Downloadable!] (restricted)
  3. Barth, E. & Raaum, O. & Naylor, R., 1998. "Union Wage Effects: Does Membership Matter?," The Warwick Economics Research Paper Series (TWERPS) 500, University of Warwick, Department of Economics.
    Other versions:
  4. Alan Manning, 1994. "Labour Markets with Company Wage Policies," CEP Discussion Papers dp0214, Centre for Economic Performance, LSE.
  5. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  6. Moene, Karl O, 1988. "Unions' Threats and Wage Determination," Economic Journal, Royal Economic Society, vol. 98(391), pages 471-83, June. [Downloadable!] (restricted)
  7. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier. [Downloadable!] (restricted)
  8. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation by Skill," NBER Working Papers 5718, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Burdett, Kenneth & Vishwanath, Tara, 1988. "Balanced Matching and Labor Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 1048-65, October. [Downloadable!] (restricted)
  10. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier. [Downloadable!] (restricted)
  11. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Hamermesh, Daniel S & Goldfarb, Robert S, 1970. "Manpower Programs in a Local Labor Market: A Theoretical Note," American Economic Review, American Economic Association, vol. 60(4), pages 706-09, September. [Downloadable!] (restricted)
  13. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  14. Salop, S. C., 1973. "Wage differentials in a dynamic theory of the firm," Journal of Economic Theory, Elsevier, vol. 6(4), pages 321-344, August. [Downloadable!] (restricted)
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